Estate Planning + Real Estate: How Ownership Structure Determines What Your Heirs Receive and Pay

Estate planning for real estate is not about estate tax — the $15M federal exemption (2026) means most families owe nothing. It is about three things that affect every family with a home: how quickly heirs can access and sell the property, how much capital gains tax heirs pay when they sell, and whether the home can be protected from Medicaid spend-down requirements. The ownership structure you choose — will, living trust, gift, or TOD deed — determines all three.

What is the most important real estate estate planning decision?

How you hold title. A home held in a living trust passes to heirs in days, privately, without probate. A home held only in a will takes 6–18+ months to transfer. A home gifted before death loses the stepped-up basis, costing heirs significant capital gains tax. A home held until death gives heirs a stepped-up basis that erases lifetime appreciation.

Should I put my house in a trust?

For most homeowners, yes — a revocable living trust avoids probate (saves 6–18 months and significant legal fees), keeps the transfer private, allows the stepped-up basis at death, and does not affect your control of the home during your lifetime. Consult an estate attorney to determine if a trust fits your specific state and situation.

Does the federal estate tax apply to my home?

Probably not. The 2026 federal estate tax exemption is $15M per individual ($30M married). The vast majority of estates including those with valuable homes fall below this threshold. 12 states have their own estate taxes with lower exemptions (Oregon: $1M, Massachusetts: $2M). Check your state’s threshold — the state tax is often more relevant than federal for most families.

Can I give my house to my children to avoid estate tax?

You can, but it almost always costs more in capital gains tax than it saves in estate tax. Gifting removes the stepped-up basis: your children inherit your original purchase price as their cost basis and pay capital gains on all appreciation when they sell. Holding the home until death gives heirs a stepped-up basis that erases that gain. For most families below the $15M exemption, gifting the home during life is a tax mistake.